1、PE INDUSTRY OVERVIEWin Mainland China,NPV Business Consulting (Shanghai) Co. LtdGuangdong Road n. 500, Room 2406200001 Shanghai, P.R. C ,12/11/2010,China Market,1) Introduction to National Economy a. GDP & CPI b. Ten Industries Promotion Plan c. Industry District Map d. National Consumption Level e.
2、 Consumption Expenditure g. The 12th Five-Year Plan2) The PE Industry in China a. History b. General Framework c. Laws & Regulations d. Types of Players e. Opportunity & Threat for Foreign LPs f. PE Industry Insight (e.g. investment breakdown by countries, by investment stages, etc.)3) PE Profiles a
3、. The GPs b. The PE Funds c. The Deals Done,Introduction to Chinese Economy,GDP & CPI,Source : National Bureau of Statistics of China,Industries Promotion Plan in 2009,Auto Industry From 20th/Jan to 31st/Dec, impose 5% purchase tax on auto less than 1.6L engine capacity Promote the reintegration of
4、auto industry, support M&A of big auto group In the next 3 years, Chinese government will arrange 10 Bln RMB to support self-creation and technology re-construction Chinese government will arrange subsidy fund to promote the energy-saving and new-energy auto in big and middle-sized cities Encourage
5、auto company to develop brand and exporting base, better auto consuming credit,Nonferrous metal Stabilize and enlarge the domestic market, better the exporting environment. Adjust the product composition to satisfy the demands of electricity, transportation, construction, machinery, light industry a
6、nd so on. Support the export of high value-added and high technology productStrictly control the total volume, and eliminate the outdated capacity Strengthen R&D and push technology progressPromote the industry re-integration, optimize the structure, strengthen the enterprise management and security
7、 inspection, enhance the competitive advantage.Take full use of both domestic and overseas resource to secure the natural sources.Build the recycling system of nonferrous in whole nation, develop recycling economy and increase the comprehensive usage of natural source. The government arrange the loa
8、n to support the enterprise reconstruction and adjust the product exporting tax refund structure.,Source : National Bureau of Statistics of China,Industries Promotion Plan in 2009,Textile Explore domestic rural market, promote the industrial usage of textile productStrengthen R&D and build internati
9、onally recognized brandsEliminate the outdated production capability, formulate entrance thresholdOptimize the industrial arrangement, set up raw material bases in west and central area while encourage eastern regions develop high value-added, high technology productsStrengthen financial support, In
10、crease the textile exporting VAT refund from 14% to 15%, give credit support to textile company with operational and financial difficulty,Source : National Bureau of Statistics of China,Petrochemical Keep the petrochemical industry stable operating Guarantee the production agricultural materialsPlan
11、 the big projection distribution and promote the technology reformControl the total production volume and eliminate the outdated production capability Strength the policy support, enhance the credit support to enterprisesImprove corporate governance structure, risk control and management capability,
12、Industries Promotion Plan in 2009,Electric information industryPerfect industry mechanism, ensure the stable growth, strengthen the computer industry competence, fasten the electric components upgrade and promote the transform of audio and visual industryFocus on the establishment of self-owned and
13、controllable integrated circuit, increase the capability of software self-development Application leads the development, push business creation and service model creation, strengthen information technology application in society, especially the new growth in communication equipment, information serv
14、ice and IT application,Source : National Bureau of Statistics of China,Steel IndustryStimulate domestic demand and maintain overseas marketStrict control on steel production, eliminate the project with singular purpose to increase the production capabilityTake advantage of leading force of big group
15、, encourage MDeepen the technology reconstruction, research and importing, create the specialized fund in annual budget to promote the steel industry technology progress, adjust the product categories composition Regulate the iron ore import market, regulate the sales system of steel,Industries Prom
16、otion Plan in 2009,Equipment productionSupport famous equipment producers M&A, and promote the hyper group with capabilities of engineering contracting, system integration, international trading and finance Push structure adjustment, transform the industry growth patternDevelop product standards sys
17、tem, develop modern production service industry.,Light IndustryStimulate the consumption from both urban and rural area to increase the domestic demandFasten the technology progress, especially domestic equipment production and key technology industrialization. Push forward the technology reform of
18、paper production, home appliance and plastics industriesStrengthen the security of food, strict the market entrance qualification and better the recall system and market exit system Strengthen the self-owned brand, support well-known brand to merge crossing region, enhance the industry concentration
19、Strengthen the industrial guide policy, promote the specific industrial area Strengthen enterprise management, raise the product quality,Source : National Bureau of Statistics of China,Industries Promotion Plan 2009,Source : National Bureau of Statistics of China,Ship buildingStabilize the productio
20、n, encourage the purchase of old vesselStimulate the market demand, actively develop long-distance fishing ship, special vessels, engineering ship, etcDevelop offshore engineering equipmentsActively develop ship repair servicesSupport M&A and establish strategic allianceStrengthen technology reform,
21、 improve the development of high value-added, high technology vessels,LogisticsActively enlarge the logistics market demand, promote the interaction between the logistics companies, manufacturers and trading companies, push the logistics service socialization and professionalization Fasten the merge
22、r and acquisition, breed big and modern logistics enterprise with high level service and international competitionPromote the logistics service in energy, mineral, auto, agriculture products, medical production and other core industries, fasten the international logistics and non-duty logisticsStren
23、gthen the logistics facilities construction, enhance the standardization and information system,CultureSubstantially push forward the transformation of state-owned cultural business entitiesActively push forward industrial restructure and resource integrationEncourage strong enterprises operation an
24、d M&A, foster key companies and strategic investorsDevelop a modern culture marketPush forward the integration of culture and high technology, develop new business modelAccelerate the transformation of government functions,Industry District Map,10 Industries Under Promotion,National Consumption Leve
25、l,Source : National Bureau of Statistics of China,Consumption Expenditure,Urban Household Expenditure Breakdown,Source : National Bureau of Statistics of China,Consumption Expenditure,Rural Household Expenditure Breakdown,Source : National Bureau of Statistics of China,The 12th Five-Year Plan,The 12
26、th Five year plan (12-5) will be Chinas key policy document for 2011-2015. There would surely be an extension of major 11th Five year plan (11-5) themes with some new focus areas. Five top themes which would be covered are income redistribution/social welfare, improving consumption, industry efficie
27、ncy/resource conservation, R and an all-dimensional system transformation in economic system reform, political system reform, social reform, cultural reform as well as ecological system reform in order to provide the framework for the transformation of the aforesaid development patterns.,Source : Th
28、e Outline of the 12th Five-Year Plan, NPV analysis,The 12th Five-Year Plan,Major 12-5 Themes and Potential Related Policies,Source : GS Global ECS Research,The 12th Five-Year Plan,Major 12-5 Themes and Potential Related Policies (Cont.),Source : GS Global ECS Research,The PE Industry in China,Histor
29、y,Old Period(1996-2005)In this period, private equity investments in China were mainly done by foreignfinancial institutions. International FinanceCorporation invested in Bank of Shanghaiin 1996, and that was regarded to have the features of private equity investment. In 2002, Mengniu Diary was Inve
30、sted by Morgan Stanley, CDH Investment and Actis Capital. After that, Famous international private equities such as Temasek, Oaktree Capital, Goldman Sachs, Carlyle and KKR invested incommercial banks as well as insurance companies in China one after another, and they all got huge returns. There wer
31、e few domestic private equities in this period, such as CDH Investment and Hony Capital.,New Period(2006-2009)With the proceeding of shareholder structure reform, the official implementation of the new Partnership Law, the announcement of related preferential tax policies and the launch of Growth En
32、terprise Board in stock exchange, the establishment of domestic private equities accelerated. At the end of 2006, the first industrial investment fund in China, Bohai Industrial Investment Fund, was approved and established. In 2007, a series of industrial investment funds , with the total scale of
33、56 billion RMB, were approved one after another. In this period, insurance companies, securities companies, trust companies and commercial banks started to take part in private equity investments with different forms.,General Framework,Private Equity Firm(General Partner),Private Equity Fund(Limited
34、 Partnership),Investors(limited Partners),Approval and Policies,Incorporation,Approval and Policies,Target 1,Target 2,Target 3,Investment,Public - IPO,Private - Sell,Approval and Policies,Exit,Fund Clearing,Private Equity Firm(General Partner),Approval and Policies,Withdrawn,Investors(limited Partne
35、rs),Laws and Regulations,Incorporation,Partnership Law The new Partnership Law, which was implemented from June 2009, provides specific legal basis for domestic funds which adopt the organizational form of limited partnership. Since the implementation, the government has had no special restrictions
36、in partnerships which launch private equity investments. In this stage, Partnership Law specifies the organizational structure of limited partnership, the responsibilities of general partners and limited partners, etc.,Administrative Measures on Registration of Partnership The new Administrative Mea
37、sures on Registration of Partnership, which was implemented from June 2009 together with Partnership Law, stipulates that when establishing the partnership, the registration of establishment should be done with the representative appointed by all the partners or the agent entrusted jointly by all th
38、e partners. In this stage, Administrative Measures on Registration of Partnership specifies registration of establishment, registration of change, etc.,Laws and Regulations,Incorporation,Interim Administrative Measures on Venture Capitals Interim Administrative Measures on Venture Capitals, which wa
39、s implemented from March 2006, states that the government launched record management of venture capitals. All the venture capitals which comply with these administrative measures and the operation of which lives up to correspondent regulations could enjoy a series of preferential policies. Besides,
40、venture capitals which adopt corporate form could entrust other venture capitals or venture capital management consulting companies to be their management consulting institutions, and to be responsible for their investment management. In this stage, Interim Administrative Measures on Venture Capital
41、s specifies the establishment record-keeping, investment operation, preferential policies, etc., of venture capitals,Laws and Regulations,Incorporation,Company Law The new Company Law, which was implemented from January 2006, states that investment companies which adopt corporate form should first c
42、omply with the requirements on establishment, capital, governance structure, operation of limited liability companies. In this stage, Company Law specifies the establishment and organizational structure of limited liability company, the qualifications and obligations of directors, supervisors and se
43、nior executives, etc.,Administrative Measures on Foreign Funded Venture Capitals If private equity funds introduce foreign investors, they should comply with Administrative Measures on Foreign Funded Venture Capitals, which was implemented from March 2003, and other laws as well as regulations relat
44、ed to Sino-Foreign Joint Ventures and Sino-Foreign Cooperative Enterprises. In this stage, Administrative Measures on Foreign Funded Venture Capitals specifies the establishment and registration, capital contribution, organizational structure, etc., of foreign funded venture capitals.,Laws and Regul
45、ations,Incorporation,Interim Administrative Measures on Industrial Investment Funds Interim Administrative Measures on Industrial Investment Funds, which was drafted by National Development and Reform Commission in November 2004, implicitly endowed Industrial Investment Funds with the characters of
46、Private Equity Funds in the international investment environment. In this stage, Interim Administrative Measures on Industrial Investment Funds specifies the promotion and establishment of industrial investment funds, etc.,Regulations on Foreign Exchange Control The new Regulations on Foreign Exchan
47、ge control, which was passed in August 2008 and has been implemented since then, specifies foreign exchange control on current account, foreign exchange control on capital account, foreign exchange control of financial institutions, RMB exchange rate and foreign exchange market management, supervisi
48、on and management, legal responsibility, etc.,Laws and Regulations,Regulations on Merger and Acquisition of Domestic Enterprises by Foreign Investors Regulations on Merger and Acquisition of Domestic Enterprises by Foreign Investors was implemented from November 2006, which aims to promote and stand
49、ardize domestic investments made by foreign investors, introduce advanced technologies and managerial experience, as well as realize the appropriate allocation of resources. In this stage, Regulations on Merger and Acquisition of Domestic Enterprises by Foreign Investors specifies the general regulation, approval and registration of merger and acquisition, the conditions, procedures and additional requirements in the merger and acquisition made by foreign investors, etc.,
